Not Monetary Policy, Rather the NFL and ESPN

The pulse of Black America these days appears to be controlled by several issues, none of which have any true impact on improving the present status quo of the African American community. These include Cam Newton's (seemingly innocents) comment regarding route running, the constant displeasure and anger toward President Donald Trump’s oral attacks against multi-million dollar celebrities associated with professional sports (namely Jemele Hill, LeBron James, & Colin Kaepernick)  and others who have decided to make a stand for (or knee) for whatever reason they say. Sure there is the occasional racist confederate statue and promoted albeit unsubstantiated Russian hacking of the US 2016 Presidential election, but anything that involves policy that could possibly actually assist in empowering the black community economically such as US monetary policy, not a whisper.

To be fair, maybe monetary policy or even fiscal policy are areas not to many African Americans take the time to understand, or maybe they feel it is too difficult a subject to comprehend. Whatever the case, you are more likely to see sincerely emotionally based thought-out gobbledygook on some stupid ish LeBron James said, or on how heterosexual black men are the white men of black people, or how Jemele Hill was right, than the previous. I would expect that a lot of cats know the difference between monetary and fiscal policy, but just in case they dont, I will attempt to explain the two, outline how a lack of focused attention on monetary policy is a slow death of the African American community and how can we change our attitudes such that we focus on tangible political issues instead of cosmetic subjects typical of identity politics that do nothing but aid in divide and conquering everybody.

Fiscal policy is a way a government adjusts its spending levels and tax rates to influence a nation's economy. Examples of this can be observed when the government implements tax cuts. Monetary policy is a macroeconomic policy put in place by central banks like the Federal Reserve designed to control and/or manage the money supply and interest rate. By macroeconomic, I am referring to general economic factors, such as interest rates and national productivity, which in theory can aid in dealing with consumption, inflation and even the Gross domestic product (overall productivity). Some common examples of monetary policy deals with regulating the discount rate of borrowing or lending and purchasing of government securities – all of which are ways the Federal Reserve in this instance, can control the country's money supply. Thus use of the noun money.

For all practical purposes, current US monetary policy is crushing the black community. Sure it has the stock markets at all-time highs (which for the record I benefit from) and has so far created the 2nd longest bull market run in history,  but it hasn’t resulted in any improvement in the economic capacity of the average black person in America. For us, it has yielded a period of wage stagnation even with the supposedly reduction in the national unemployment rate producing economic inequality levels we ain’t had since before the Great Depression. This is even after all the stuff Bush and Obama did based on the request of the Federal Reserve, supposedly to help Main Street (Quantitative Easing, TARP, and the bailouts of Bear Stearns, AIG, and GM). Overall, the median household before-tax incomes have fallen from near $55,000 to $53,000 presently, which means it is even worse for African Americans.

So far, Fed monetary policy has widened the employment gap for prime-age African Americans and whites. Plus, Blacks tend to slightly (if at all), participates in the financial markets, which over the past 8 years have served to mostly advantage the upper 10%. All of which is primarily determined by Federal Reserve’s monetary interventions. Although progressives like Obama and the mainstream media’s  assert that Federal Reserve policies thattarget full employment benefits African-Americans, it is not clear to how this can be the case when there is no evidence of this (albeit Obama said it was), or to support that specific unemployment for certain ethnic racial groups are considered when they formulate and implement monetary policy.

Since 2000 the African-American unemployment rate has been double the white unemployment rate with the unemployment rate of African-American teens being more than six times higher than the overall white unemployment rate.  Janet Yellen, the Federal Reserve Board Chair even said that the US central bank was basically powerless to do anything specifically to tackle high unemployment rates in the black community. 

More to this point, Former Minneapolis Fed President Narayana Kocherlakota conducted research on the minutes and transcripts of the central bank’s meetings and found no referencesto the African American unemployment. This was in 2010 and searches for 2008 and 2009 detailed a similar result – at a time when African Americans were disparately being hard hit by the foreclosures when the housing bubble burst. The mortgage crisis in concert with the 2008 economic slump devastated 47 percent of black families’ wealth, wealth which has yet to be recovered.

With 80% of Americans on average earning less than $50,000 and one in two making less than $30,000 annually, it appears that US monetary policy is either tone death or designed to serve the top 10 percent. In some places, especially urban areas and major cities, the unemployment rate is for African-American men between the ages of 18 and 37 is nearly 40 percent unemployment and near 50 percent in cities like Chicago, Baltimore and even Atlanta.

Until the Federal Reserve factor in the experience of black economic conditions when developing and implementing monetary policy, nothing will change. But this won’t change until we who suffer by foul and ineffective monetary policy become more knowledgeable of the issue and remove ourselves from the ridiculous and mundane things we claim to be the most outraged with. Sure they recovery is strong, but only for a small segment of the population, for the average African American it has mainly worsened economic inequities. So forgive me if the removal of a statue, or some millionaire paid to play a kids game is mad supposedly due to police brutality aint that important to me.  I’m mad at this too, but I’m equally upset with the 538 murders and 2,913 shootings in Chicago to date (maybe even more) than the  329 whites, 165 blacks,112 Hispanics killed by police thus far according to the Washington Post. The prior of which is more a function of economic reality of actually failed monetary policy than a rebel flag. But that is just me.

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Notes on the Greenspan Culture

Most Americans are ignorant to the history and impact of central bank policy in the US on the problems we are experiencing and have experienced before regarding our economy.  The first failure came when Alexander Hamilton introduced the concept of having a Central Bank in America right after the revolutionary war. His idea was to place the US in a positon to be able to get loans or credit from lenders and be able to borrow great sums of money. To get the bank started, he proposal to fund a national debt via several bills in 1790 including the Debt-Assumption and Debt Funding Bills. With this concept would come massive speculation and fractional reserve banking. Many were against this idea. Thomas Jefferson wrote about this when his cousin Chief Justice John Marshall used the views of Hamilton to uphold the constitutionality of a national bank in his McCulloch v Maryland decision, in essence putting the nation on a dependency of credit. Jefferson noted that the constitution had not delegated to the congress to be able to incorporate a bank (10th amendment) nor to borrow or regulate commerce and that the establishment of a national bank was not necessary, merely a convenience and congress had the constitutional duty to do what was necessary only (pps. 502-574).

Failures of Federal Reserve policy since then and over the years have been too numerous to cite.  The issue is that the Federal Reserve and the concept of central banks in general act as if they are independent institutions when the truth is they are never independent. This was understood by both Andrew Jackson and FDR, and to a lesser extent Abraham Lincoln. Central banks seem to operate in a vacuum that is isolated from the public and even worse, the public angst and disdain regarding their policy efforts. 

Central banks are failing and have been failing for a long time since their most recent establishment under the Woodrow Wilson administration under the cloak of darkness. These chronic problems keep rearing their ugly head because the models that they employ are broken for they fail to connect monetary policy with the real economy (aggregate demand). This has become more problematic since the reign on Alan Greenspan. This Greenspan culture operates on constructs that don’t exist in the real world and even seems to suggest central bankers of the current batch have no idea of what is going on in the rest of the world outside of Jackson Hole. No matter what they do it always fails and never accomplishes the goals or objectives that said monetary policy was supposed to accomplish. 

Take the example of quantitative easing and keeping interest rates artificially low and constant.  This was supposed to put more loot into the coffers of business and to some extent the people and spur consumption - the assumption being that if you give folk more loot they will spend it, or at least consume more. But we see just by looking at consumption behavior, business are not spending by either investing or buying equipment and regular folks are saving instead of spending. Even with mortgage rates at 3.5 percent, people are not buying homes.  It begs the question what world are central bankers living in because all they talk about (if Janet Yellen can be taken at her word) is raising interest rates. On the one hand the public is being told the Central bank can control economic outcomes but can’t control inflation – a concept that anyone can see is not only problematic but also ridiculous.

Why would they slow the economy down by raising interest rates when it is growing at a staggering and paltry pace already? This makes no sense in particular when the average citizen is confronting real economic hardship and despair and all the evidence (weak fundamentals) indicates this. If this is the path the US central banks takes, it will only prove what many already believe, that the central bank is for the wealth plutocratic class only and it only implements policy on their behalf that presents modern capitalism as merely socialism for the rich. If this is the case then maybe, just maybe, central banks shouldn’t take on fiscal policy. In all honesty, maybe fiscal policy should be only implemented by folks the citizens vote on, or maybe we should vote for central bankers for that matter.

If I was given the authority first step I would take to destroy this Greenspan culture of hybrid fiscal/monetary policy would be to get rid of the Volcker rule in its entirety.  Maybe this way we won’t have to hear dumb azz Janet Yellen cite David Reifschneider anymore. Reifschneider for the record seems to be Yellen’s go to guy. Whatever he says she holds on to like it was the word of God. Reifschneider is a Senior Economist for the Federal Reserve Bank and posits (really guesses without evidence) that bond purchases and low-rate promises should be enough for the Fed to deal with severe recession if such were to occur. This is why I think she has not been out into the real world for she is always saying the same thing, or rather something to the effect that US GDP growth to lift labor markets. Again, an observation I don’t see even looking at BLS data, for there is no known value for potential economic output whether one is taking about labor or GDP – all of this is just speculative talk.

Simply put, central banks, in particular the US Federal Reserve should not be involved in developing, formulating or implementing fiscal policy. This should be left in the hands of the Treasury department in my opinion. One should ask what is their policy and where would we be if they couldn’t buy assets? Since 2008, the US Federal Reserve bank has amassed $2.5 trillion in Treasury securities and $1.8 trillion of mortgage-backed securities (maybe even more) through its asset-purchase programs, yet we still have deplorable growth and horrific levels of unemployment if you read between the lines. What will be next? Will we follow the lead of Japan and start to buy exchange-traded funds (ETFs), or the ECB and begin to purchase corporate debt? Or even worse follow the path of Prime Minister Modi in India and remove cash from circulation?  It is even easier to do in The US with electronic/digital money.  More so given that today, money has no real value in and of itself due to separation of them from the original sources of money – gold and silver. Used to be a time when paper money just represented how much gold and silver we had, but not anymore. Add this to the massive depreciation and devaluation of money over past decades, a cashless society could be a real manifestation. But I regress.

All I am saying is that the philosophical acceptance of Greenspan economics has shown the ineffective, foolish and disconnection from reality that Fed policy is, and that we need to move beyond the make believe boundaries of Central bank policy (guessing) before it is too late.  It is impossible to look at all economic activity in a contrived environment, under a contrived lens in which all stating points begin with full employment, inflation at 2 percent, and interest rates atnormal longer-run levels.  Honestly, like the Euro, the Federal Reserve Bank was flawed from birth.

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